Correlation Between Pool and Joint Stock
Can any of the company-specific risk be diversified away by investing in both Pool and Joint Stock at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Pool and Joint Stock into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Pool Corporation and Joint Stock, you can compare the effects of market volatilities on Pool and Joint Stock and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Pool with a short position of Joint Stock. Check out your portfolio center. Please also check ongoing floating volatility patterns of Pool and Joint Stock.
Diversification Opportunities for Pool and Joint Stock
0.66 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Pool and Joint is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Pool Corp. and Joint Stock in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Joint Stock and Pool is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Pool Corporation are associated (or correlated) with Joint Stock. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Joint Stock has no effect on the direction of Pool i.e., Pool and Joint Stock go up and down completely randomly.
Pair Corralation between Pool and Joint Stock
Given the investment horizon of 90 days Pool Corporation is expected to under-perform the Joint Stock. But the stock apears to be less risky and, when comparing its historical volatility, Pool Corporation is 2.34 times less risky than Joint Stock. The stock trades about -0.18 of its potential returns per unit of risk. The Joint Stock is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest 9,688 in Joint Stock on November 27, 2024 and sell it today you would earn a total of 612.00 from holding Joint Stock or generate 6.32% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Pool Corp. vs. Joint Stock
Performance |
| Timeline |
| Pool |
| Joint Stock |
Pool and Joint Stock Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Pool and Joint Stock
The main advantage of trading using opposite Pool and Joint Stock positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Pool position performs unexpectedly, Joint Stock can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Joint Stock will offset losses from the drop in Joint Stock's long position.The idea behind Pool Corporation and Joint Stock pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| Joint Stock vs. Ryanair Holdings PLC | Joint Stock vs. Coty Inc | Joint Stock vs. Alaska Air Group | Joint Stock vs. Aterian |
Check out your portfolio center.Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Commodity Directory module to find actively traded commodities issued by global exchanges.
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